Incident: The company announced its 2023 annual report, achieving operating income of 5.342 billion yuan (+18.26%), net profit of 1,482 billion yuan (+37.66%), net profit after deducting non-return mother of 1,267 billion yuan (+41.77%). The reasons for the increase in performance were: 1) Consolidate the position of the blood products industry through measures such as increasing pulp collection, improving the comprehensive utilization rate of plasma, optimizing product structure, and increasing production and research and development of products urgently needed in the market; 2) Concentrate superior resources to develop new vaccine products to prepare quadrivalent influenza virus lysis vaccines and quadrivalent influenza virus lysis Manufacture and sale of products such as vaccines (children's dosage forms) and freeze-dried human rabies vaccines (Vero cells) to expand and strengthen the vaccine business. On a quarterly basis, Q4 achieved operating income of 1,429 million yuan (+56.23%), net profit to mother of 414 million yuan (+135.85%), and net profit of non-return to mother of 361 million yuan (+166.97%).

Vaccine business: The subsidiary Hualan Vaccine achieved revenue of 2,410 million yuan (+32.03%) in 2023 and net profit of 860 million yuan (+65.49%) to mother. In 2023, Hualan Vaccine did a good job in the development, production and sales of vaccine products. The number of quadrivalent influenza vaccines and influenza vaccine batches continued to maintain its leading position in the country. A total of 94 batches of influenza vaccine were issued, including 73 batches of quadrivalent influenza vaccine (adult dosage form), 15 batches of quadrivalent influenza vaccine (children's dosage form), and 6 batches of trivalent influenza vaccine. A total of 25.357 million doses (+33.38%) of the above influenza vaccine can be seen. We believe that with the promotion of national policies, the further improvement of public health awareness, and the gradual increase in payment capacity, the sustainable development of the industry will usher in new space. Furthermore, in February 2023, Hualan Vaccine successively obtained “Drug Registration Certificates” for freeze-dried human rabies vaccine (Vero cells) and adsorbed tetanus vaccine, further enriching the company's product line.

Blood products business: Achieved revenue of 2,926 billion yuan (+9.22%) in 2023. Among them, albumin revenue increased 6.97% year over year, hydroxypropyl increased 8.96% year over year, and other blood products increased 11.87% year over year. In 2023, the company accelerated the construction of new single plasma collection stations and strengthened the management of single plasma collection stations. The blood products business maintained steady growth, achieving 1342.32 tons of plasma collection, an increase of 19.59% over 2022. The company actively applied for the construction of new single plasma collection stations. In 2023, the company successfully built 4 plasma stations and successfully obtained the “Single Plasma Collection License”, actively promoted work at the construction of plasma stations, and completed license exchanges for 11 plasma stations to enhance plasma collection capabilities and ensure business compliance. At the same time, the company is strengthening the promotion of plasma donors at existing single plasma collection stations, further improving the management capabilities of plasma stations, exploiting the potential of single stations, and promoting endogenous growth in plasma stations.

Profit forecast: We expect the company's net profit to be 1,724 billion yuan, 2.01 billion yuan and 2,316 billion yuan respectively in 2024-2026, up 16.4%, 16.0% and 15.7% year-on-year respectively. We expect the company's blood products business to pick up moderately, and the influenza vaccine business will re-enter the expansion period in the post-pandemic era. Referring to comparable company valuations, we gave the company 25-30X PE in 2024, with a corresponding reasonable value range of 23.57-28.29 yuan, maintaining a “superior to the market” rating.

Risk warning: The risk that the amount of pulp collected falls short of expectations, and the risk of influenza vaccination falling short of expectations.